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This paper presents a study for demonstrating the capability of photovoltaic system (PV System) in enhancing the damping of the inter-area oscillations in a smart grid network. In this context, investigations are conducted on a single-machine infinite bus (SMIB) system. PV-based stabilizer is designed for enhancing power system dynamic stability. The stability action is achieved through the independent control of real power flow from the controller and voltage at a point of common coupling between controller and the grid system. A novel approach of tuning controller is proposed by particle swarm optimization (PSO). The advantages of adopting the PSO in this research include easy implementation, a high computational efficiency and stable convergence characteristics and the proposed work is demonstrated through time-domain simulation.